Chinese Finance Minister Lan Buan (center), National Development and Reform Commission (NDRC) Chairman Zheng Shanjie (left) and People’s Bank of China Governor Pan Gongsheng speak at a press conference March 6, 2024 Sunday on the sidelines of the National People’s Congress in Beijing, China.
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BEIJING—China’s Finance Minister Lan Foan said at a press conference on Saturday that the central government has room to increase its debt and deficit.
He said such policies are still under discussion. Lan said the four policies that have reached the decision stage include support for local governments to address debt risks and stabilize real estate, large state-owned banks and youth employment.
Economists say China needs additional fiscal support, but the Chinese government has yet to announce any amid a spate of recent high-level policy announcements.
At a meeting in late September led by Chinese President Xi Jinping, authorities called for more support for monetary and fiscal policy. However, details were not disclosed.
Analyst estimates of how much fiscal stimulus will be needed range from about 2 trillion yuan ($283.1 billion) to more than 10 trillion yuan.
Ting Lu, Nomura’s chief China economist, warned in a note Thursday that such a stimulus package would typically need approval from China’s parliament, which is scheduled to meet later this month. He added that how the funds are used is just as important as the amount awarded. Will it be used solely to support struggling local governments’ finances, or will it focus on promoting consumption?
China’s retail sales have grown only modestly in recent months, and the country’s real estate recession shows few signs of improving.
GDP rose 5% in the first half of this year, raising concerns that China will miss its full-year target of around 5%. All eyes are now on October 18th, when the National Bureau of Statistics will announce the third quarter GDP.
Mainland stocks have been volatile throughout the week as the stimulus-driven rally ran out of steam after markets reopened on Tuesday after a week-long holiday. The decline returned major indexes to their late September levels.
Stocks were rising at the time, with the CSI 300 index posting its best week since 2008, as major policy announcements suggested the Chinese government would finally intervene to stimulate slowing growth.
Just days after the Fed began its easing cycle, the People’s Bank of China cut some interest rates and extended existing real estate support measures for two years. The People’s Bank of China also launched a roughly $71 billion program that allows institutional investors to borrow money for stock investments.
The National Development and Reform Commission, the top economic planning agency, pledged at an unusual press conference on Tuesday to accelerate the use of the 200 billion yuan originally earmarked for next year, mainly for investment projects. The NDRC did not announce any additional stimulus measures.
Saturday is a working day in China, but markets are closed.
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